Ep. 392: Danny Moses, The Big Short

Ep. 392: Danny Moses, The Big Short

Danny Moses joins us and shares his investment insight: “I like the PrivateMarkets probably just a little bit better here because it’s longer duration capital. You don’t feel the immediate need to buy or sell something based on a daily move- a rumor that’s out there, and so forth.”

Transcript:

Seth Adler: Danny Moses joins us. One of the characters in The Big Short. Also a person. Welcome to Cannabis Economy, I'm your host, Seth Adler. Download episodes on canneconomy.com. That's two n's and the word economy, or wherever you currently get your podcasts. First a word from Wana Brands and then Danny Moses.
Want to Know with Wana Brands. Nancy [Caps 00:00:22].

Nancy: Yes. Wana Brands has a really exciting product line with our extended release caps. They come in five formulations, different CBD and THC ratios. But the thing that we really are excited about with them is that they are such a discreet and consistent product for people. They last anywhere from 8 to 12 hours and it's a very consistent experience all the way through. So not a lot of the ups and downs that you get with the other forms of ingestion.

Seth Adler: So, Danny Moses, thanks for having me in here.

Danny Moses: Thanks for coming in.

Seth Adler: We're somewhere in New York City.

Danny Moses: Yep.

Seth Adler: I can already just to set the stage because the people know the name, right, from The Big Short. Some people read the book, more people saw the movie. The character that is Danny Moses in the movie doesn't feel like you, my friend.

Danny Moses: No.

Seth Adler: We've known each other for about 45 seconds. Already I can tell that there's a difference there.

Danny Moses: Yes, in the book I'm much more aggressive. In the book I'm the one that says, "How you gonna fuck me on the trade?" And in the movie, I become like a restaurant connoisseur who kind of gets chased by alligators and is docile, and I'm like, well, it is what it is, but you know, it was fun.

Seth Adler: What are you going to do?

Danny Moses: Exactly.

Seth Adler: And I'm sorry to hear about the testicle by the way, if that's true.

Danny Moses: Well, it's a long story about a vasectomy that went wrong, but we can talk about that at another ... Is this a health show, or is this ... ?

Seth Adler: Of course it is. It's bonus, you know that.

Danny Moses: Exactly.

Seth Adler: You know that.

Danny Moses: Always good at operating there, so we're good.

Seth Adler: Why would you do this. You're known for one of the biggest trades in the history of mankind, you don't have to be doing this.

Danny Moses: You're talking about cannabis?

Seth Adler: I am.

Danny Moses: Well, I was burnt out from Wall Street all those years and I realized it was a non-fundamental tape as it related mostly to financial services stock, which was the last iteration and hedge fund that I had with my former partners, Porter Collins and Vincent Daniel who were also featured in The Big Short.

Seth Adler: Danny Moses joins us. One of the characters in The Big Short. Also a person. Welcome to Cannabis Economy, I'm your host, Seth Adler. Download episodes on canneconomy.com. That's two n's and the word economy, or wherever you currently get your podcasts. First a word from Wana Brands and then Danny Moses.
Want to Know with Wana Brands. Nancy [Caps 00:00:22].

Nancy: Yes. Wana Brands has a really exciting product line with our extended release caps. They come in five formulations, different CBD and THC ratios. But the thing that we really are excited about with them is that they are such a discreet and consistent product for people. They last anywhere from 8 to 12 hours and it's a very consistent experience all the way through. So not a lot of the ups and downs that you get with the other forms of ingestion.

Seth Adler: So, Danny Moses, thanks for having me in here.

Danny Moses: Thanks for coming in.

Seth Adler: We're somewhere in New York City.

Danny Moses: Yep.

Seth Adler: I can already just to set the stage because the people know the name, right, from The Big Short. Some people read the book, more people saw the movie. The character that is Danny Moses in the movie doesn't feel like you, my friend.

Danny Moses: No.

Seth Adler: We've known each other for about 45 seconds. Already I can tell that there's a difference there.

Danny Moses: Yes, in the book I'm much more aggressive. In the book I'm the one that says, "How you gonna fuck me on the trade?" And in the movie, I become like a restaurant connoisseur who kind of gets chased by alligators and is docile, and I'm like, well, it is what it is, but you know, it was fun.

Seth Adler: What are you going to do?

Danny Moses: Exactly.

Seth Adler: And I'm sorry to hear about the testicle by the way, if that's true.

Danny Moses: Well, it's a long story about a vasectomy that went wrong, but we can talk about that at another ... Is this a health show, or is this ... ?

Seth Adler: Of course it is. It's bonus, you know that.

Danny Moses: Exactly.

Seth Adler: You know that.

Danny Moses: Always good at operating there, so we're good.

Seth Adler: Why would you do this. You're known for one of the biggest trades in the history of mankind, you don't have to be doing this.

Danny Moses: You're talking about cannabis?

Seth Adler: I am.

Danny Moses: Well, I was burnt out from Wall Street all those years and I realized it was a non-fundamental tape as it related mostly to financial services stock, which was the last iteration and hedge fund that I had with my former partners, Porter Collins and Vincent Daniel who were also featured in The Big Short.
We did okay after four or five years, and then we decided to shut it down and needed a break.

Seth Adler: Okay.

Danny Moses: And ... it's tough wanting to short everything, in general.

Seth Adler: Right.

Danny Moses: And we always approach things from the value side, we always looked at balance sheets first. If those were poor, we would go after a company, whether it was financial services or retail, whatever it would be.

Seth Adler: Okay.

Danny Moses: So I kind of let my mind wander a little bit for six months, nine months, met some of these cats at Merida.

Seth Adler: Mm-hmm (affirmative), what year was this?

Danny Moses: So stepped away from kind of the money management at the end of 2016, so early 2017, so only a couple of years.

Seth Adler: Oh, there we go. And you cannabis years are dog years already, right?

Danny Moses: What's that?

Seth Adler: Cannabis years are dog years, have you not heard that yet?

Danny Moses: Yeah, no, I've not, I have not, but I totally respect, I say this all the time, people that have been doing it for five, seven years deserve all the credit-

Seth Adler: Sure.

Danny Moses: I'm a latecomer.

Seth Adler: Let alone 25, 30-

Danny Moses: [crosstalk 00:03:10] 25. What's really interesting though to me is that I like things that aren't quote, "oversaturated", and when I say that I mean retail money has come into this space, it's come and gone over the last five to seven years, I've tracked that somewhat in the backdrop. But there's no institutional money in it, obviously, for obvious reasons. One, it's not legal, there weren't a lot of ways to play it like there are now, that's evolving, we can talk about that.

Seth Adler: Sure.

Danny Moses: And there weren't a lot of eyes and ears, and it was a lot of B and C players in general. I don't mean that to sound superior, that I'm an A player, I'm just saying there hasn't been an expertise that's been applied to the sector, or it is happening now. And when I met Mitch Baruchowitz at Merida, he struck me as a guy who obviously knew the grassroots, no pun intended, of this business, had come from Wall Street, little bit different background than I did, but he's a lawyer by trade and because his background was licenses, and understanding the legality state by state, which I think is very, very crucial, the more you learn, the more you know you have to arbitrize the rules from state to state. That was a great background for me to kind of learn.
And then my first iteration of an investment was with Mitch outside of Merida, in a grow in Maryland.

Seth Adler: Okay.

Danny Moses: And my first attraction to this space was the opioid crisis. And I've said this before, thank God there's no one immediately in my family that has had an addiction, but it struck me as an obvious substitute. And what really struck me was the laws in Maryland, the way that they wrote those laws. I didn't realize dentists prescribe ... you know, after you get your wisdom teeth pulled they could prescribe 30 days of painkillers to you. They don't want to see you back in their office-

Seth Adler: No, go away.

Danny Moses: It's, "Go away, if you get dry sockets, it's good, take this pill." And the way that Maryland recognized that and said, "You know what, we'll let dentists prescribe medical marijuana." I don't know the status of that, but that was kind of the catalyst. And I said, "You know what, just a substitute, as a way to promote healthcare, as a way ... " And I've always had a view, cannabis, I never wanted to be known ... when you have two teenaged sons, as "Pot Dad," you know? It wasn't that, it was more for the medical, and I do not endorse kids smoking cannabis.

Seth Adler: Sure.

Danny Moses: Recreationally, because I do think it has an impact on the brain.

Seth Adler: Yeah.

Danny Moses: I do believe that-

Seth Adler: Brain's not fully developed, my-

Danny Moses: Brain's not fully developed.

Seth Adler: Neuroscientist brother-in-law can tell us that.

Danny Moses: Exactly, and it creates the pathways of laziness, whatever it would be. So I try to kind of thread the needle on that, so to speak. So anyway, back to what got me excited, it's a wild west frontier, I see opportunities that ... I can read balance sheets, I can go through 10Qs and 10Ks, I have that in my background to try to understand.

Seth Adler: Sure.

Danny Moses: So you're going to hit some mine fields obviously in the space. You have to deal with a regulatory environment. And so as things got ... as I learned more and more, I tipped my toe in, my ankle, my knee, I'm probably up to my hip at this point in this stuff, and it's fun. And so you ask me why, because I haven't been excited about an industry, a sector, in my lifetime that has this type of growth in front of it. You think about ... you know, I traded through the internet bubble, and that was exciting because there was new technologies, new companies, and some of those still exist today, and some are gone.

Seth Adler: Sure.

Danny Moses: Traded through the financial crisis, when it looked like every mortgage that was written was gold, every ... and you start to see, and yes, is there a little bit of too much euphoria surrounding ... I think there's a disconnect between the trend in the macro of cannabis, and trying to pick stocks within it and getting impatient, or ... in terms of trying to find the right-

Seth Adler: Let's unpack that a little bit.

Danny Moses: Okay.

Seth Adler: What do you mean by that?

Danny Moses: What I mean by that is that there's many ways to play, to express your trading cannabis. You could do it now, you couldn't, by the way, six months ago there was probably ... it's grown five fold-

Seth Adler: Yeah.

Danny Moses: [inaudible 00:06:46] It's part of the reason there's a little bit of backup, I would say, or ... indigestion maybe is the better word in the space right now, in stocks, is that you've brought a lot of companies to market. The scarcity value, when I first started looking at it the only way to play it was either bulletin board stocks in the US, or cannabis companies listed in Canada.

Seth Adler: Right.

Danny Moses: And now you have this weird situation where you have ... you know, companies listed in the US are domiciled out in Canada.

Seth Adler: Right.

Danny Moses: And companies listed in Canada are domiciled in the US, this is weird, which you're well aware.

Seth Adler: Yeah.

Danny Moses: So there's a lot of ways to express. If I wanted to play the market in Canada, I could go play canopy at the time. If I wanted to play the packaging company in the US, I could play kush, there was just so many ways to express it, now there's more.

Seth Adler: Right.

Danny Moses: And in the middle of all this, the regulatory environment, as you know, is getting better, and better, and better. And it's not just the state by state approvals, it's the federal bills that are on the table that as we speak now the farming bill looks like it should pass next week.

Seth Adler: Right.

Danny Moses: Legalizing hemp, which makes CDB the next big thing-

Seth Adler: Sure.

Danny Moses: It already is.

Seth Adler: Right.

Danny Moses: And then the state's act, potentially, if they don't ... whether they de-schedule marijuana or not, from a schedule one, you may not need that yet to get ... So, back to your point, I don't want to play it through an ETF, the MJ, like yes, that tells you where the market ... how the retail money is thinking about things when you see the flows go in and out of it, but that's not ... I want to play bottom up, and really private equity. And that's the barred entry, right? So being an investor in Merida, you get to see a lot of deals that come through, and maybe for every 10 deals Mitch sees he invests in one or two, but you learn something in each of these meetings, you learn something about the markets, and every corner of it. You know, whether it's CBD, whether it's packaging, whether it's audit software, whether it's logistics, whatever it is, and you're seeing smarter and smarter people start to enter the fray.
So I would say that ... I would say to your question, I like the private markets probably just a little bit better here because it's longer duration capital, you don't feel the immediate need to buy or sell something based on a daily move and a rumor that's out there and so forth.

Seth Adler: Which is your old life.

Danny Moses: Which is my old life, right, that's what I got tired of. I mean, I did not want to trade Tweets, which is the other reason, once Trump won in 2016 I'm like okay, now they're going to get rid of the CFPB, which they basically did.

Seth Adler: Right.

Danny Moses: Now they're going to repeal Dodd Frank and Volcker. And I don't know how to trade financial services, how do you trade these? So that was back-

Seth Adler: I just want to take that tangent.

Danny Moses: Yeah.

Seth Adler: Because that's an amazing thing for someone like you to say that.

Danny Moses: Yeah.

Seth Adler: What do you mean by that? You can't trade that? How-

Danny Moses: It's non-fundamental, everything ... people are, people get paid do it.

Seth Adler: Yeah.

Danny Moses: You have to do it, I get it.

Seth Adler: Right.

Danny Moses: I had a choice, fortunately, to just step away and return ... my partners and I said, "You know what, it's just too hard right now," especially with the sector that we were trading financial services, which is predicated on interest rates and regulation are the two driving ... and credit costs, and things like that. But we went from the ... exposing credit card companies for what they were doing-

Seth Adler: Yeah.

Danny Moses: There was a regulator arbitrage that was basically inherent in the financial services sector, because of Dodd Frank and Volcker, there's certain things that banks couldn't do, and certain things they could.

Seth Adler: Right.

Danny Moses: We would find companies that would be basically ... how do you say it? Would be taking advantage of regulatory arbitrage rules, which we thought would eventually bite them in the ass.

Seth Adler: Okay.

Danny Moses: When Trump won, we immediately realized that because ... because the pro Wall Street Republicans were controlling the House, the Senate, and the presidency that we were going to be ... sweeping reforms were going to come in.
And yes, people went ahead and traded the tax cut a year before, I mean, things were already ... it was already anticipated what was going to happen. But it went from ... the easiest way to say it is it went from a fundamental tape, to a technical/regulatory tape. Meaning fundamentals didn't matter anymore.

Seth Adler: Interesting.

Danny Moses: Whether you could predict earnings and cash flows to the penny, and try to figure out what the stock price should be in the future-

Seth Adler: Right.

Danny Moses: Or even current, it went out the window.

Seth Adler: The reason that I'm so interested in you saying this is isn't the whole housing bubble thing, the fact that there wasn't any fundamental in that?

Danny Moses: Well, that was a ... that was a leverage. I mean, that's leverage is what caused the housing bubble.

Seth Adler: Okay.

Danny Moses: And it's the ability of mortgage companies that were getting credit lines from banks that seemed to be endless to go out and create these pools of mortgages, turn around and sell them back to the banks, and the banks would distribute them in the form of CDOs, and other investments, to their clients which are the insurance companies-

Seth Adler: Right.

Danny Moses: And some funds, and so forth. So that was a ... Ponzi scheme is probably too strong a word, but that was a money flow issue. That was a ... it was going to end. And the way that it ended, and the way that we identified, which you well know is, we found the one ... I mean, we didn't find it, but it's obvious the one thing was home prices. If home prices themselves stop going up, or that they ... then it's over, because the loan to values, all the things that you would look at, there's just no way around it.

Seth Adler: Why is Ponzi scheme too strong of a term for that? Because that is how you would describe a Ponzi scheme.

Danny Moses: Right, because there was ... I guess there weren't many winners.

Seth Adler: Okay.

Danny Moses: In a Ponzi scheme, normally there's a Bernie Madoff somewhere. Yes, certainly, people made money for a period of time.

Seth Adler: Yeah.

Danny Moses: But I actually believe many of the people believed that they were just doing their job, and it would continue. So if you look at the prop tests of all the large Wall Street banks that were printing money at the time, people though they were geniuses because they were buying mortgages. It's like ... it basically came down to just the liquidity and leverage, but they got greedy, of course, the leverage was in the system, and let me shift back to cannabis.

Seth Adler: Please.

Danny Moses: There's no leverage in cannabis, there's no debt really to speak of in cannabis. So it's very interesting to me, because you have this time period where you can capitalize companies with equity, and you can command great terms on those equity tranches tranches that you're getting, you can get warrants, you can get things like that. And so that's the part that attracts me the most, is-

Seth Adler: Because it's completely different.

Danny Moses: It's completely different. Yeah, there will be zeros in the cannabis space, obviously, whether there's bad corporate governance, or just bad business plans, or whatever, people get over their skis, but it's going ... there will be ... if you can find the aggregators, and the winners in the space, then I think you can make a ton of money here over the next some.

Seth Adler: So aggregators, finding the winners in the space, we bring up the farm bill and I kind of separate this thing into three. And one of the things we never talk about, so there's the THC game, that's what cannabis is for the most part in peoples' minds.

Danny Moses: Yep.

Seth Adler: You bring up the farm bill introducing, essentially, the CBD market-

Danny Moses: Yep.

Seth Adler: Which folks know about from the internet.

Danny Moses: Yeah.

Seth Adler: But there isn't a lot of ... what? It's not so loud.

Danny Moses: Right.

Seth Adler: And then there's industrial hemp, which can get you t-shirts and-

Danny Moses: Sure.

Seth Adler: Paper, and pretty much anything else you want to make, like BMW car doors.

Danny Moses: Correct.

Seth Adler: No one talks about that.

Danny Moses: Yep.

Seth Adler: Let's talk about each of those three.

Danny Moses: Okay.

Seth Adler: The cannabis market-

Danny Moses: Yes.

Seth Adler: Our friends in THC.

Danny Moses: Right.

Seth Adler: What are you most excited by?

Danny Moses: I think that the wellness aspect. So we saw Epidiolex, GW form obviously, get approved by the FDA a couple months ago-

Seth Adler: Yeah, but that's CBD.

Danny Moses: I know, I'm going back through the medical ... so, that was CBD, so that should've woken people up to the fact that it is proven that CBD can help kids with epilepsy. I mean, think about it. So there's no ... there is no ambiguity at all with that statement. So it works, so that means it works in other things, that means there is a health benefit. We know it's an anti-inflammatory and so forth. So let's just start with that as validation that this is not a gimmick.

Seth Adler: Got it.

Danny Moses: This is not ... okay.

Seth Adler: Check the box, we've got reality.

Danny Moses: Check the box on that, right. Let's go back to what's happening in the markets, why we saw Constellation take a stake in Canopy, why we saw today Altria take a stake in Cronos. Why we're seeing these things occur. And that's because traditional, old school consumer companies are feeling the pinch, not just in general because tobacco is not as popular as it used to be, but in the markets where cannabis is legal, and there's an alternative to alcohol and tobacco, you're seeing market shares drop for those companies, so they're making an offense/defense play here. And the reason that's important, it goes back ... now let's shift to the farming bill. In the states, in the red states, let's say, which you traditionally would say, "What do you mean they're going to approve cannabis?"

Seth Adler: Yeah.

Danny Moses: And you're right, there's a lot of misnomers and people don't understand industrial hemp, and hemp, and hemp based CBD and so forth, is that they realize it's an economic win. And I was surprised, actually, that they're going to allow ... I mean, up until the last minute I'll believe it when I see it, but that they'll allow hemp, that they'll allow CBD production as part of the farming bill, but it got in. But it got in. Back up-

Seth Adler: So far.

Danny Moses: So far.

Seth Adler: And podcast land knows no time, but we are in-

Danny Moses: We no, no time, we're in real time.

Seth Adler: It's kind of-

Danny Moses: We are on-

Seth Adler: Next week.

Danny Moses: Altria, Cronos day-

Seth Adler: Yeah.

Danny Moses: We're on the-

Seth Adler: There you go.

Danny Moses: Exactly, who knows what Trump will end up doing, he could shut the government down, but as of this moment it looks promising.

Seth Adler: Sure.

Danny Moses: So there's a whole nother leg here, and obviously there's a lot of people who don't understand cannabis, and up until maybe five or six years ago when I thought of the cannabis business, I thought of a friend of mine, let's say, that I was in college, kind of didn't do well, moved to Colorado, had a grow, had a dispensary, is doing okay, but it's kind of the burnout ... it was kind of nothing that was real. And I was naïve in the sense of what had been going on for the last five or six years.
So THC, obviously, is a psychoactive element of one of hundreds of ...

Seth Adler: Cannabinoids.

Danny Moses: Thank you.

Seth Adler: Yeah.

Danny Moses: Cannabinoids in the plant, and the two most prevalent are THC ... or the two that people know about, and CBD. CBD can come from a cannabis ... the traditional cannabis plant, but there's a lot of cross pollination, I'm learning these things, right, and so there's a lot of contamination. The hemp based CBD is easier to grow, indoor, outdoor and be much more abundant, right? And again, I don't know the entire process of converting the hemp plant into oils and so forth like that-

Seth Adler: Extraction.

Danny Moses: Yeah, all the extraction stuff.

Seth Adler: Right.

Danny Moses: But, that being said, it's ... the horse is out of the barn. And so if I look at the market and how it's going to be, beverage companies we're seeing already with hemp based beverage companies that probably shouldn't be selling across state lines but they already there, there's no enforcement really occurring. That's going to be validated I think by this. So there's the first mover, quote "Vitamin Water" advantage, I always like to think of Vitamin Water, get shelf space, sell, but there actually are potential ... and none of these things are going to say medically benefit ... medically proven, FDA certified, but it just makes sense to say, "Okay, it's an anti-inflammatory, it doesn't taste bad, why don't I have like a kombucha drink with hemp in it, right, why wouldn't I?"

Seth Adler: Why not?

Danny Moses: What's the downside?

Seth Adler: Yeah.

Danny Moses: So now you're seeing a scramble, I think Coca Cola obviously, or Pepsi, these guys are all coming. They're just waiting for the farm bill, because for them the risk reward is not worth it, and they'll be acquiring these companies.
So you're going to have a THC component of business, you'll have a THC/CBD, you already have that in the markets where there's patches that are part CBD and part THC. And everybody's ... and you know this better than me, everybody's brain reacts different. We all have the receptors in our brain, I may feel something that you don't feel, you may feeling something that I don't feel, could be a CBD, some people feel dizzy on CBD without THC. So everybody has to figure out what they want to use it for, and it's a wellness and a lifestyle, but I think bring it full circle, there's a lifestyle change going on right now.
So we know that alcohol is poisonous relative to cannabis, and we know that in general.

Seth Adler: Okay.

Danny Moses: I'm not saying that you should drive on either or at all, but what I'm saying is that the toxicity of alcohol is worse than cannabis, that we know. And anything in moderation is fine, but cannabis is ... in the ... I don't have demographics in front of me, but I'm just going to guess, in the age group from 21 to 31, that group is shifting away from alcohol and tobacco obviously, and to cannabis in various forms.
And so you're seeing influencers out there now, you're seeing ... so there's going to be a lot of failures in the CBD beverage space, we have a lot of failures in the edible CBD space. But there's going to be a lot of winners, and so ... I think it's interesting when you break down the people that just want to get high, the people that want to feel good, and then to your point about the industrial hemp, go back to Reefer Madness. In the 1930s, obviously you know this, but the history was very racially driven of why ... but there was also a business aspect of it. The companies in lumber, and cotton, they got scared of industrial hemp.

Seth Adler: William Randolph Hurst himself.

Danny Moses: Exactly. So-

Seth Adler: So the story goes.

Danny Moses: So the story goes.

Seth Adler: The Duponte family.

Danny Moses: Duponte, they basically created whatever excuse they could to basically outlaw and get this thing scheduled as a schedule one drug. And that was because it had business impact, so to your industrial comment, that's another boom. That's something we haven't even talked about, because it's not quote "cannabis".

Seth Adler: Right.

Danny Moses: But you're right, you could make bricks. I mean, you can make shirts, textiles, anything from hemp, and it's a much cheaper alternative. So that to me ... that's a whole nother segment for you, and you should be talking to an industrial analyst, and ... but yeah, it's a real boom. So you tell me what sector in the last 20 years has the potential to not ... to generate wellness, to generate taxes, to generate jobs. I don't think it's ever existed, or it hasn't existed in our lifetime. Most of the other advances have been technology driven, right?

Seth Adler: Yeah. Yeah.

Danny Moses: You had the auto boom back in the 40s and 50s, all those things.

Seth Adler: Sure.

Danny Moses: This is big. And so this ... the horse is out of the barn in all of these categories. And it's just ... it's a minefield of what you decide to choose to go into, and so ...

Seth Adler: The fact that the same plant can make me not have epileptic seizures and also is in the car door of my BMW-

Danny Moses: Yes.

Seth Adler: Is-

Danny Moses: Amazing.

Seth Adler: Ridiculous.

Danny Moses: Yes, that's a great way to say it. Yep, I agree, yep.

Seth Adler: So you do kind of see all of that. How do you focus your mind into wins, as you say?

Danny Moses: Well, I wouldn't smoke before I sat down to focus, but-

Seth Adler: Fair enough, okay.

Danny Moses: But no, but-

Seth Adler: [crosstalk 00:20:40]

Danny Moses: Yeah, no, so the way I'm looking at it now is that I ... and you're seeing it already, so obviously the US multi-state operators, the Acreages of the world, Cresco just went public, they're all over the place. Some are folks in Florida, some are multi-state, but let's use Acreage as an example. You're going to see the complete vertical integration and continued growth. One is that all these companies have to validate their valuations. They're going to grow into these numbers. But the economies to scale are very dramatic. They're buying brands, Acreage yesterday bought an edible company and got another license out west, so they're not in 19 states. As a mom and pop operator, as a grower, you're not going to survive. One, you're going to be prisoner to the prices of cannabis, which will probably drop precipitously over time, obviously.

Seth Adler: Right.

Danny Moses: But there's no ... so companies will go out and buy and take their economies of scale and apply it.

Seth Adler: Right.

Danny Moses: Processing, growing, they'll own the brands. So they'll vertically integrate completely. So you could take the low risk, potentially high reward of investing in those, and the safety in numbers are these multi billion dollar, multi-state operators which I think will end up being the winners in the space, that's kind of the best way I can see.
Or, find a company that is quote, "getting shelf space", that doesn't have debt, that is profitable, maybe it's in the private equity market more than likely, find access to it and I would tell people Merida is probably a great way to do it, I'm not just ... I'm not an employee at Merida, I'm obviously just ... I just play one on TV.

Seth Adler: Right.

Danny Moses: But ... the eyes and ears of having people ... most people in the retail world don't see that stuff, they're not going to have access to that stuff. But the most interesting thing is the real money's going to be made when the banking industry, so ...

Seth Adler: So that's the states act, right?

Danny Moses: Yes, that-

Seth Adler: The easing of 280E and the easing of banking even though FinCEN guidance all the way back in the Jim Cole days already makes it okay.

Danny Moses: Okay, right, so there's been no real enforcement.

Seth Adler: As far as guidance for treasury.

Danny Moses: Exactly. And the bankers will, of course, advise on M&A transactions, and financing for these deals because they'll argue that US companies are buying Canadian, it's legal in Canada but they're still providing the financing on all these deals, it's a complete hypocrisy.
But, when the banks just ... people need to think about this. If you're a private company and you're looking for funding right now, and you're trying to raise five or 10 million dollars, and whether you're making CBD beverages, or whether you're making ... whether you're launching a technology product that helps with advertising in the space, whatever, you're prisoner to so many ... there's only so many funds that are really investing in it, and you have to give up a lot. Whether it's to convert, or whether it's an equity investment with warrant coverage, you're giving up a lot, and you're getting diluted as the founder.
The cost of capital was what I'm saying is high right now for these companies, they can't even deposit their money in a bank, it's retarded. It's ...

Seth Adler: frittata.

Danny Moses: Yeah, frittata, yeah.

Seth Adler: That's better.

Danny Moses: Yeah, we'll cut that. It's really absurd. If banks start lending money against inventory, against property, against ... it's a game changer, because the cost of capital drops dramatically. And so I'll make up a cost of capital right now, it's 15 to 20% for a cannabis company, so it's going to drop to seven, to 10, what happens to your valuation of a company if you have access to that? So that, to your point, the states act is much bigger and I think people are thinking, "Oh, I need a de-scheduling of the drug." And all that. You don't need that. If the states act comes in the right form, banks will start lending. Believe me, banks will start lending, and there will be so much M&A in the space that's going to occur. So and that's why I still think we're in the third inning here.

Seth Adler: Yeah.

Danny Moses: And I don't think there will be a fourth, fifth, sixth, or seventh inning, I think you go straight to the eight inning. You'll see-

Seth Adler: Third to eighth.

Danny Moses: Third to eighth.

Seth Adler: Skip.

Danny Moses: Skip. Rain delay, come back eighth inning. I don't see how we don't jump. So of course now you get short reports, we saw on Aphria, and that goes back to doing your work and good corporate governance and not just plowing into something without really doing the work on a company, but-

Seth Adler: Why don't you just share the Aphria anecdote from your perspective? What happened there?

Danny Moses: Well, I mean-

Seth Adler: Besides bad governance.

Danny Moses: Everyone knows ... right, but listen, the space has been such in the last couple of years, at least since I've been looking at it, where people are overpaying for assets in general to get access to certain markets. Whether it's Latin America, whether it's Florida, whatever it would be, you're paying ... you're coming up with a present value dollar amount of what you think you can get into, and like I mentioned before, you have to validate your valuations. I mean, Aphria obviously having that type of market cap just in Canada, they had to validate kind of ... so they'll overpay, and that was acceptable.

Seth Adler: Okay.

Danny Moses: This came out in the spring, and this has been six months, seven months already that this short report ... actually this firm that put out the short report had put out something already in April or May, I believe, questioning the valuation, questioning the process for how they determine this stuff.
So I would just leave it at ... and listen, it was an impressive presentation, the short report, I went into it with an open mind, and I read it and I go, "Listen, this is credible, factual, coming from a short seller," like I would do something, not that extravagant, but obviously they're trying to make money too, so we know that. There were some good points that were brought up. And whether anything was illegal, that's yet to be determined, I'm not going to make that call, people should ... well, it was hard to access all that information on their own, because there's not a lot of stock coverage on these companies.

Seth Adler: Right.

Danny Moses: Most of them are brokers up in Canada, like you had to do all your work, so it's easier said than done to do that work, but that's my point about just splashing money into this space without really paying attention. So hopefully they'll be okay.

Seth Adler: Yeah.

Danny Moses: Whether some of the board or management needs to go or not, as a sacrificial lamb.

Seth Adler: Feels like they probably should if anything.

Danny Moses: Yeah, I know, so-

Seth Adler: Come on, man.

Danny Moses: We're going to see a lot, this is in real time, but we'll see a lot in the next couple months. And many of these companies don't trade off of current revenue and earnings, obviously, they trade off future expectations.

Seth Adler: Of course.

Danny Moses: And I think in October 17th when Canada-

Seth Adler: Legalized-

Danny Moses: Virtually legalized-

Seth Adler: Yeah.

Danny Moses: You saw obviously a sell on the news event. And at the same time it just so happens that all these US companies were raising capital. And all the institutional in the US, what's happening right now is the risk reward of a major hedge fund that has investors that are pension funds, and aren't going to invest. However, the GPs of those hedge funds, and I won't name them, but many of them are invested, personally.

Seth Adler: Right, right.

Danny Moses: In their family offices, so to speak, because to them the risk reward is what, are they going to make a million dollar, two million dollar investment in a cannabis company, even if they make tenfold they risk blowing themselves up to their current investor base.
So that next leg of legalization, states act, however it were to occur, you're going to see a wall of money come in of people that are late to the game.

Seth Adler: Yeah.

Danny Moses: And so whoever's dressed the best at the prom, whatever of these cannabis companies has the best corporate governance, has the best business plan, and then needs growth capital-

Seth Adler: Yeah.

Danny Moses: They're your winners.

Seth Adler: Yeah.

Danny Moses: And so that's crucial right now. So this take a deep breath in this time period before the farm bill, before the states act, and look across the landscape and see where do you ... where does someone think there's going to be growth? Well ... Altria is telling you, Constellation Brands is telling you, these things, these are mammoth sized transactions, right? You can say that they overpaid, that's fine, but there's a scarcity value, or there has been a scarcity value, to make sure that you can get the supply that you need to create whatever product you want.

Seth Adler: Sure, it's even more scarce once these investments are made, right?

Danny Moses: Exactly. Hemp will be interesting though, that'll be very interesting.

Seth Adler: That's the next thing, we'll talk about that next time.

Danny Moses: Yeah.

Seth Adler: I want to make sure I understand maybe you a little bit more.

Danny Moses: Yeah.

Seth Adler: Where are you from?

Danny Moses: I was born in Athens, Georgia-

Seth Adler: Okay.

Danny Moses: So I'm a big University of Georgia fan.

Seth Adler: Okay. Does that also make you an REM fan?

Danny Moses: Yeah, I like 'em, a little bit depressing sometimes, their music over time.

Seth Adler: Very depressing to me, yeah.

Danny Moses: Yeah, it kind of went down. I don't like the B-52s.

Seth Adler: Dave Matthews Band? Is that-

Danny Moses: No, he's from Charlottesville.

Seth Adler: Yeah.

Danny Moses: Although I'm a huge Dave Matthews fan, it's funny, I just saw him three times in concert in the last couple weeks.

Seth Adler: All right, so you're from there.

Danny Moses: Grew up in Atlanta.

Seth Adler: Where did the money thing come in? How did you figure out-

Danny Moses: So my dad was a finance professor.

Seth Adler: Oh, that would help.

Danny Moses: Yeah, the reason he was at Georgia, he was an [inaudible 00:28:29] undergrad, got a real education unlike Trump who probably never went to class, but that's a whole nother thing. He was getting his PhD at Georgia when I was born, and basically wrote several books on investing, case management studies, was a professor, became dean of business school, so we moved around a lot like a military family, right?

Danny Moses: So kind of moved around a lot as a kid. And so it started that I would read the back of the business section when I was like eight years old or nine years old, and we owned a couple stocks, my dad did. And one was Oxford Industries. And ... a textile company. And the stock was like eight bucks or something, and I said, "Can we get a dog?" He goes, "Not unless Oxford gets to 10." Or whatever the number was. So every day I'd open up the business section and look. Man, I couldn't even see it now if I tried, my eyesight's so bad.

Seth Adler: Sure, right.

Danny Moses: But OXM, I'm like "OXM ... " look down the Os, I'm like 850, 870, this was when things trade in quarters and halves, by the way, so there was no ... it was easy to see. It hits 10 maybe after a couple years or whatever and I'm like, "Dad, dog time." He goes, "20." You know, he kept moving the goal post on me.

Seth Adler: Moved the chain, yeah, exactly.

Danny Moses: Yeah. So but that was my first interest in the space, and I just grew up around it. And so I always had an interest in the markets and how they operated, and ...

Seth Adler: What did you major in?

Danny Moses: Finance.

Seth Adler: Where?

Danny Moses: Emory University in Atlanta.

Seth Adler: Okay, fair enough.

Danny Moses: Which I would probably not get into at this point now it's become so hard. But I'm a big student of behavioral finance. Like, to me ... I never took classes on it, per se, but watching how people react, watching retail money go into something, noticing trends, noticing ... to me, that's the antenna, that's the potentially competitive advantage.

Seth Adler: That's the signal, those are the signals.

Danny Moses: Yeah, don't confuse brains with a bull market, right, has always been the saying. So when everything's going up, everybody thinks they're a genius. And so I don't want to single out Bitcoin per se here, but that was a retail phenomenon and certainly block chain's here to stay, I don't want to go after people that were early in Bitcoin because truth be told, when it was at 500 bucks before on it's way to 18,000-

Seth Adler: Right.

Danny Moses: I wouldn't have touched it.

Seth Adler: Okay.

Danny Moses: So let's just be clear, I never believed in this-

Seth Adler: Why not?

Danny Moses: Virtual currency, because here I am looking at cannabis at the same time I'm looking at two unregulated things, one has ... one you can touch, you can smoke-

Seth Adler: Right.

Danny Moses: You can do stuff with.

Seth Adler: Right.

Danny Moses: And one is on the ether. And I think there's a big confusion between applications of these cryptocurrencies, and really it was the ICOs which turned me off the most, when I saw these ICOs I'm like, "This is just blatant fraud." This is incredible what people are putting money into, I'm like, "This thing is not going to last."

Seth Adler: Okay.

Danny Moses: But block chain technology that is on the backbone of all of this is real.

Seth Adler: That's a different story.

Danny Moses: But you need banks to back these things to make them work. You can't transfer assets unless a bank is verifying who you are, who I am. And so they're buying in now, but that has nothing to do with the price of Bitcoin per se. And the funniest thing is that you think about how these virtual currencies emerged, it was drug trafficking, sex trafficking, black market operations of getting your currency, that's how it all began, we know that. I mean, that was kind of the genesis of block chains. It's just so funny to me how it was accepted before cannabis was.

Danny Moses: And that's why I mentioned the age group of 21 to 31 year olds that don't know that.

Seth Adler: Right.

Danny Moses: They grew up without that knowledge. They don't know that Nixon had these racist policies to create-

Seth Adler: Well Harry Anslinger all the way back, I mean, he's the guy.

Danny Moses: Right, okay, yeah, you know more than I do, but the genesis of it, it's just in peoples' brains and it takes a while to change that. That's what's changing right now, and that is becoming socially acceptable. And ... my grandmother is rubbing CBD on her knee because her knee hurts right now. Think about that, I mean 96 year old Holocaust survivor is rubbing cannabis on her knee. I mean, it's hilarious, but it's working okay for her.

Seth Adler: Please send her my best.

Danny Moses: I will.

Seth Adler: She's a survivor, right, that's crazy.

Danny Moses: Yeah, I know, it's an amazing store, still in Greenville, South Carolina.

Seth Adler: Do you want to do the elevator version of that story just so we ...

Danny Moses: Anyone that wants ... yeah, you can look up Max and Trudy Heller, H-E-L-L-E-R, that's my mother's parents. And he passed several years ago, but my grandmother is still alive. They were in Vienna, Austria in 1938, '39 and my grandfather at the time met this church group from Greenville, South Carolina, used to write letters back and forth, this was before he met my grandmother, because they're four years apart, so he was 18, she was 14, we won't go into that.

Seth Adler: That's a different [crosstalk 00:32:50].

Danny Moses: But long story short, he, after Kristallnacht when Nazis came into Vienna, he wrote a letter, he goes, "You've got to get me out of here," to this woman, Mary Mills, it's in every show of foundation, like you can find the story. Anyway, he gets to Greenville, South Carolina and then brings over whoever he can, we lost the majority of our family in the Holocaust, but my grandmother was living in the woods, escaping Nazis, living off of bread, or a loaf of bread or nothing at all for days and weeks, was supposed to be on a boat to go to the US, missed, didn't get on that boat because they didn't let her out of France, and that boat was sunk by the Nazis, she got on the next one-

Seth Adler: Oh my God.

Danny Moses: Just crazy stories, I can't even do it justice in an elevator pitch.

Seth Adler: Yeah, sure.

Danny Moses: But their story is incredible, especially in this day and age, of immigrants coming over to create a life, and I'll leave it at this. The reason Oxford Industries, back to why I followed that stock-

Seth Adler: Sure, yeah.

Danny Moses: Why it was in the family, my grandfather, Max Heller, became ... he basically got a job as a janitor when he came over, Greenville, and worked in the textile shop, they were making shirts or whatever. And after a couple years he started his own Maxon Shirt Company at the age of 21 or 22, I don't remember exactly. And then he sold it to Oxford Industries.

Seth Adler: Oh my.

Danny Moses: At a very young age.

Seth Adler: Right.

Danny Moses: So in the 1960s he decided he was going to give everything back to this country. He became city councilman, became mayor, and if anyone listens to this has even been to Greenville, South Carolina, there's a statue of my grandfather downtown. A Jewish immigrant in Greenville, South Carolina, and he's pointing, and there's a whole like ... there's other statues there, there's plaques and everything about him. And if you look downtown Greenville, he believed in like Vienna, he ... it's all outdoor cafes, he believed that people should live quote, "downtown", he brought BMW, he helped bring Michelin into Greenville. He was an amazing guy.

Seth Adler: That's crazy.

Danny Moses: It's a really amazing story.

Seth Adler: Yeah.

Danny Moses: A really American story of its kind, it's really relevant in this day and age, so-

Seth Adler: You say in this day and age, and I wonder ... I mean, there's a different type of dialogue as far as anti-Semitism, the word Nazi-

Danny Moses: Yeah.

Seth Adler: The old imagery is propped up, maybe it's because of the way media acts now, but it feels like maybe more than ever.

Danny Moses: Yeah.

Seth Adler: Do you have thoughts on this, based on your-

Danny Moses: We just went from cannabis to Nazis. No, I mean again, I think it has to do with generational ... people aren't studying history and they forget, and they ... believe what they hear on the news, not singling out any news stations, but people are just naïve. And history can repeat, in different forms. I mean, there's a Holocaust going on somewhere in the world always, right, there's somebody that's being persecuted, somebody that-

Seth Adler: Right, genocide, yep.

Danny Moses: Genocide. And so I just think it's just education, and people to understand. But my point about why it's relevant today is the immigration policies and so forth, it's easy to forget every American was an immigrant, it's easy to forget, and so it just hurts to see what this person that can't come in from Central America, and I understand the economics of ... you can put it on paper but this is humans, these are human beings. And so it's very difficult to watch what's happening around the world, and having a family history of it, I'm very sensitive to it.

Danny Moses: I mean, anytime you let the banks run wild, or anytime you curb back there reins or let the reins go, I should say, they'll try to exploit something. And so I don't know if it'll be in oil derivatives, I don't know if it'll be in a Bitcoin derivative, I don't what it will be, but Wall Street always goes through cycles of something. So Deutsche Bank you're seeing now once again has done ... obviously not just getting raided but some of the stuff they've done with the money laundering and so forth.

Seth Adler: Yeah.

Danny Moses: There's not as much leverage in the system as there was, period. I don't see another Big Short type global financial crisis occurring, but you do see, what's amazing to me, and I've talked about this before, is every time that there's a loss that a bank decides to take a chance on oil on their prop desk or whatever, and I'm sure there's going to be losses we're going to see in the fourth quarter that will end up coming out. They'll bury them, couple hundred million dollar loss here and there-

Seth Adler: Right.

Danny Moses: Who pays for it? It's the shareholders that pay for it. If they do something that skirts the law and they get ... who pays for the fine? It's the shareholders.

Seth Adler: Yeah.

Danny Moses: No one's been held accountable.

Seth Adler: Yeah.

Danny Moses: Really, for the most part during the ... post financial crisis or during it, so no one's learned from a moral perspective at all on it. And I think, listen, there's certain Dodd Frank rules that were too harsh. Some of these small community banks around the country should not have been subjected to the same criteria, they just shouldn't have been, their costs are too high, and it does, it's not fair. But the large guys that are getting what they want now, and some won't even exploit what they ... but it's nice, they like to know that they can do things, right?

Seth Adler: Right, yeah.

Danny Moses: So they can keep more stuff on balance sheet, they can hedge out more things on balance sheet without disclosing, they can do more things, they can provide more capital to the markets, which isn't always a bad thing, but I just ... inevitably, any time that you allow more leverage, which is basically when you cut back regulations, you'll have more leverage in the system by nature.

Seth Adler: Right, right.

Danny Moses: Because you'll have a mis-marked portfolio of something, you thought your denominator was X, it was Y, whatever. So-

Seth Adler: Yeah.

Danny Moses: There will be stuff. A lot of the stuff, my biggest concern right now is in the ETF and kind of the fixed income ETF markets in general. And there's a duration mismatch, so to speak, out there. And I think mom and pop investors that want yield and they see these monthly dividend paying loan securities, they don't know what they own. And you're starting to see the impact in the last few weeks, and there's been several traumatic, volatile days, both up and down. And by the way, neither is healthy.

Seth Adler: Right.

Danny Moses: 70 points up in 40 ... nobody makes money in those markets, because inevitably people are selling at the low and buying at the high, chasing their tail. But the Michael Lewis book that followed The Big Short, Flash Boys, which I was obviously a part of as well, is now coming back into play because all the algorithmic trading, electronic trading is exacerbated when it's ETF and computer driven. These aren't individual stocks, so when a wall of money comes into sell the XLF, or the XLU, or XRT, whatever, pick your poison, people don't realize all the underlying securities that go with that can go through a period of massive fluctuations, volatility, and people don't understand that.
So the volatility's going to be here to stay. And no one ever cares about volatility when the market's going up.

Seth Adler: Are humans running the markets, or-

Danny Moses: No.

Seth Adler: Are machines running the markets?

Danny Moses: It's really machines, and it's scary. And I'll come back into the money management one day when humans have a bigger play and it matters. And by the way-

Seth Adler: Don't we have to have like an economic apocalypse for that to occur?

Danny Moses: Correct, I always make that argument. The only way I come back in is if the ... if stock picking matters again, and the only way stock picking's going to matter is a wipe out.

Seth Adler: Yeah.

Danny Moses: 20, 30% type number, we'll see. It's happening. There are so many ... I don't have the numbers in front of me, there are so many companies, forget about the FANG, forget about the top five representing 50% of the market share, a lot of companies are getting walloped. And what happens is they may be a dividend paying company that maintained their dividend because their five largest shareholders were ETFs and not funds, so they know who their client base is-

Seth Adler: Right.

Danny Moses: They need to maintain. They shouldn't have been, they should've cut their dividend years ago, but they kept doing it, they got into a cash crunch, all the sudden they report earnings, and the algos pick up what do you mean down EBITA, what do you mean down earnings, and that stock gets killed because it wasn't owned ... it was owned by computers, and so that computer didn't spit it out. And listen, you can make money off of that if you understand-

Seth Adler: What's happening.

Danny Moses: What's happening, but ... cannabis is nowhere near that yet.

Seth Adler: Sure.

Danny Moses: But the MJ, even looking at that ETF, it creates havoc, right? You have six or seven companies representing 85% of that ETF. And so when money pours in around, it'll affect all of them pari passu, and you're like I don't understand. Aphria is here, why is everything else getting hit? It's just sympathy, and there's a core loser reason for it, there's math for it.

Seth Adler: Yeah, where's the Altria in the Aphria trade or whatever?

Danny Moses: Yeah, exactly, exactly.

Seth Adler: So the books have been written, and you can go and read those. As we land this plane, I wonder emotionally, the day, the moment that the thing happened which made you the winner.

Danny Moses: Yeah.

Seth Adler: And then the entire global economy collapsed. What does that do to a man's brain? What-

Danny Moses: Right. I guess there wasn't really one moment. I guess the realization, the final nail was Lehman. But things had already happened before September 2008. Things were already happening in Fannie Mae and Freddy Mac, those were the big ones, Bear Stearns.

Seth Adler: Right, we were on the rollercoaster-

Danny Moses: The things were already happening.

Seth Adler: On the way down to Lehman.

Danny Moses: Exactly, and that was just the culmination of everything.

Seth Adler: Over that timeframe I'm saying.

Danny Moses: It was so crazy, because it's one thing to be right, and it's another to realize that you're sitting at a firm, we were owned by Morgan Stanley, that the guys across the room are the ones that are potentially blowing up, and here we are trying to tell them, "Guys, what are you ... " and again, it was all how you got paid, right, if you were on the Morgan Stanley prop desk, what did you care? You would try to take risk until it blew up in your face and you just leave. I mean, so these guys were making 10, 20 million dollars a year on the prop desk.
But it was an unnatural, scary thing. And the hardest thing was all the government programs which were instituted or tried to kind of save the day. The TARP.

Seth Adler: TARP.

Danny Moses: The TALF.

Seth Adler: Right, yep.

Danny Moses: PPIP. I mean, think of an acronym they had it for it. And to try to trade around that and understand could that really do anything, would that do anything? Bernanke cutting rates, the quantitative easing. Again, that's when we became a non-fundamental tape, that's when it became just about liquidity, that's when it became ...
So that was a minefield to deal with, it was an emotional rollercoaster. But also you have to put your brain ... the short ban. I mean the short ban that happened and we got caught one day, and I don't remember exactly the date of that, but when they banned shorting, I think it was 2009. Sometime in 2009, after all this stuff.

Seth Adler: Yeah.

Danny Moses: London Bandit we knew was coming here and here we are scramming around our positions in our book. But for us, it was a culmination, because we weren't a fixed income fund, as you know, we were an equity fund, and Steve Eisman who ran it and did very well with it, we had longs, we had shorts, and then we had this CDS book of CDOs and mortgage backed securities. And towards the end, and in the movie this is part of the part where like ... Vinny's on the steps of St. Patrick's ... that was St. Bart's church, but in reality it did happen. And it wasn't when we told Steve to close out the position, but we always said, "Guys, we just made 90 cents on the dollar on fixed income," expressing a theme that we had, let the brokers have the last 10 cents back. We don't even know how to get out of these things.

Seth Adler: Right, yeah.

Danny Moses: I mean, what is the ... we're not lawyers, we weren't going to go to the courthouse steps and say, "Okay, we're settling for a penny on the dollar." And convincing Steve of that was difficult, and he wasn't wrong, but to ... structurally we weren't set up for that.
So that was kind of the end, and I was so relieved once that part was kind of ending, and I never thought that we did anything that hurt the economy. As a matter of fact, we're not heroes at all, but I would argue that just the shorts, not just us, Michael Berry, by the way there's several funds that were doing it, the movie just featured a small group.

Seth Adler: Right.

Danny Moses: That actually stopped the process, that were calling people out on the short. And it could it have gone on much longer anyway, no, but someone there is creating the trade. And at the beginning of it-

Seth Adler: You guys are the only ones talking about facts.

Danny Moses: Yes, exactly. And still there's a disconnect in the marketplace on facts. But it was a crazy time. We felt vindicated. It wasn't like we celebrated making money as much as we did say we were right, you know, and how did the world not see it? How did the ... and it seeped into every walk of life. The people I feel the worst for are the people that worked at the banks that didn't make the money, like the prop traders did, that had their 401ks dismantled and destroyed. The people that unknowingly got into these sophisticated 228, 327 mortgage products that ended up having to foreclose upon their home and really ruin their lives. And those are the ones that I feel ... that we had nothing to do with that I feel bad for.

Seth Adler: Right.

Danny Moses: And a lot of those mortgage companies, they all went out of business. Most of them nobody ... pretty much no one went to jail. But that was a harsh reality. And those people, many of those people, never came back into the markets. I'm guessing until the last year.

Seth Adler: Right. Which is-

Danny Moses: And you're seeing kind of last in, first out. And so like that's the ... where we are now as far as the broader markets are concerned. I think there's a frothiness to it of kind of bring in the last group of retail money that finally decided to come into the space.

Seth Adler: But on the other side of this frothiness, you don't see quite the dip, quite that apocalyptic-

Danny Moses: Oh, I can create an apocalyptic scenario in the markets. I mean, it's not ... I've been calling for that for a couple years now, so ... it hasn't been right, except I think we're at the point right now, I would call the other side of Goldilocks, which I talked, is that okay so the fed stops hiking, why did the fed stop hiking? The fed stopped hiking because there's issues, there's either fundamental issues, macro issues or whatever. So the market is not cheap, and don't let anyone tell you that own a 4P, because remember, there are so many subjective numbers issued by companies. They adjust to EBITA, adjust to earnings, adjust to this, adjust to that. Non cash comp being excluded. All these things are ... it's a game, it's an accounting game. And it's not every company but it's some of them.

Seth Adler: Right.

Danny Moses: And they're ... I always talk about one particular company, Tesla, which I think will be the Enron of this cycle, which is-

Seth Adler: Really? Just because the value ... saying nothing of anything, the value doesn't add up to what the company is.

Danny Moses: It's not ... I mean, you don't have 10 billion dollars of debt, trading at 85 cents on the dollar, and a 60 to 70 billion equity market cap company, that doesn't work, something's ... somebody's right and somebody's wrong. But it's not just that, it's the accounting, it's the-

Seth Adler: Oh, you think it is?

Danny Moses: Oh no, if you do forensically, you will look at Tesla, and whatever the auditor signs-

Seth Adler: Enron accounting is occurring is what you're saying.

Danny Moses: Well, in a different business, but yes, subjective accounting is occurring. All for near term pain to go away for Elon Musk and the company, it doesn't make any sense to me. If you look at the numbers, anyone objectively doing work on that company, this is why I'm out of the business by the way-

Seth Adler: I gotcha.

Danny Moses: It's so frustrating. Look, they're going to wake up one day and this thing may be gone.

Seth Adler: Yeah.

Danny Moses: And no one should be surprised. And buyer beware, because they're buying into-

Seth Adler: At that point you know what you do?

Danny Moses: Yep.

Seth Adler: Go to Mars.

Danny Moses: He won't have a vehicle to do it.

Seth Adler: Oh that's right, it's already up there.

Danny Moses: But yeah.

Seth Adler: Final three questions-

Danny Moses: Yes.

Seth Adler: I'll tell you what they are, I'll ask you them in order, what's most surprised you at work along the way, what's most surprised you in life, and on the soundtrack of your life, one track, one song, what's got to be on there. First things first.

Danny Moses: Oh my God, hold on, what was the first question?

Seth Adler: First question is what's most surprised you at work? We just talked about your work for quite some time, what's most surprised you, Danny Moses, the guy that did The Big Short?

Danny Moses: Yeah, so when you say work, are we talking about the stock market, are we talking about the ...

Seth Adler: Take it as you will.

Danny Moses: I think what surprises me the most is the ... inherent belief that people have that ... well I would say for me personally, federal reserve is always there to save them, that there's an embedded quote "put option" that exists by the federal reserve that they'll always have your back, that we are so used to, in the last 10 years, quantitative easing, oh, they're going to be there for us, they're going to be there for us. And I think that false sense of security, to me, that surprises me the most. Of how we've gone into a non-fundamental tape of how ... and I would say that's shocking to me.
And you've now shifted from 40 to 50 year old traders who understood the markets to 25 to 30 year computer engineers. And so the non-fundamental nature of the tape, I guess, is probably what shocks me the most.

Seth Adler: Still surprising, still shocking.

Danny Moses: Yeah.

Seth Adler: Even though you know.

Danny Moses: Right.

Seth Adler: You know what I mean?

Danny Moses: Yep.

Seth Adler: What's most surprised you in life?

Danny Moses: That's a good question. Man. I'm trying to think of something good, on the good side that surprised me in life.

Seth Adler: Okay.

Danny Moses: But I would say how much ... well I don't want to get way too personal, but how much love you can have for your children and family. And when things are ever tough or whatever, I think money doesn't matter at the end of the day. It doesn't.

Seth Adler: Well you can say that if you have money.

Danny Moses: Right, no, money can't buy you happiness. But it's the most rewarding thing. And so I would say surprisingly, I didn't what to expect by being a father, and a husband, and so forth, but I would say that that's the ... best thing.

Seth Adler: The love.

Danny Moses: The love. The love, baby, the love.

Seth Adler: There you go.

Danny Moses: So, yeah.

Seth Adler: On the soundtrack of your life, one track, one song that's got to be on there.

Danny Moses: I mean, it's got to be Three Little Birds by Bob Marley.

Seth Adler: Look at you.

Danny Moses: I mean, that's not just a cannabis reference.

Seth Adler: No, it's not.

Danny Moses: That's just rise up this morning, smiled at the rising sun. Yeah, there's nothing better than that, so-

Seth Adler: Everything's going to be all right.

Danny Moses: Everything's going to be all right. So absolutely.

Seth Adler: Danny Moses, thank you so much.

Danny Moses: Enjoyed it, thank you.

Seth Adler: And there you have Danny Moses, very much appreciate his time. Very much appreciate your time, stay tuned.

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